The Importance of Employing an Employer of Record for Full-Time International Teams

Many business owners may not fully grasp the necessity of bringing on board an EOR company. A common line of thinking is, "Why should I engage an employer of record in another country when I can simply hire contractors?" However, what often escapes the attention of company managers is that, in numerous countries, there are legal consequences for failing to distinguish between contractors and full-time employees.

In the United States, the penalties are stringent, potentially amounting to up to 20% of all wages paid, in addition to all FICA taxes for both employers and employees. The severity of penalties varies from one country to another.

Regrettably, the scope of tasks and the level of oversight that can be exercised by a manager over a contractor are limited.

When a manager aims to establish an effective work environment, the importance of training, investing in equipment, and monitoring the team's performance becomes evident. To build a top-performing team, it is undoubtedly more advisable to rely on full-time professionals as opposed to contractors.

However, once the decision is made to bring on permanent hires, there comes the responsibility of dealing with paperwork and ensuring full compliance with local regulations. To avoid the hassle of keeping up with legal changes and tax documentation deadlines, many company managers opt to enlist the services of employers of record.